Question

Kirsten Malon has found a way to profitably exploit her computer know-how. She has started a firm that offers consulting services for computer and software repair and analysis. Most of her customers have purchased computers or software systems with little vendor support and need help in installing and using the systems effectively. Kirsten has expanded her business recently to include 25 technicians besides herself, and her client base has grown to over 1,900. Many of these clients are on a retainer arrangement (a fixed fee per month which guarantees access to a certain number of hours of technician time) to stabilize her cash flow. With the success of the business, Kirsten is now thinking about beginning a related business which would publish books and newsletters on computer and software issues.

Required: What are the critical success factors likely to be for Kirsten’s business, now and into the future? What cost management information is she likely to need: management planning and decision making, management and operational control, or product and service costing, and why?

Answer 1

Critical success factor (CSF) is a management term for an element that is necessary for an organisation or project to achieve its mission. It is a critical factor or activity required for ensuring the success of a company or an organisation. These are the key areas in which the organisation has to do well if they are to remain competitive and profitable and to grow in new segments. The critical success factors have to be linked with the overall strategy of the company.

We can also use key performance Indicators (KPIs) which are the ways through the organisational performance for the CSF can be measured. It is a measurable value that demonstrates how effectively a company is achieving key business objectives. Organisations use KPIs to evaluate their success at reaching targets.Without KPIs the performance of CSF cannot be measured.

Here for Kristen Malon we will divide the Present CSF and Future CSF by linking it through Balance Scorecard approach to cover all possible aspects of business :

Prespective	Present Critical Success factors	Future Critical Success Factors	Key performance Indicators
Financial	1.Become the No. 1 company in terms of market share in 10 years.	1.Become the bestseller in books and newsletter industry beating all competitors	1.Profitability ratios. 2.Revenue growth 3. Variance to budget.
Customer	1.Retain 1900 customers through providing 100% satisfactory services	1.Be the No. 1 Choice of readers who prefer books to get their problem solved related to computers and software.	1.Customer queries/doubt after providing assistance. 2.No. of copies of newsletters or books sold.
Internal Business	1.Proper utilization of total hours of technical times of technicians. 2.Total quality management in providing services.	1.Total quality management in content creation in Books and newsletters. 2.The content should address present as well as expected problems of readers.	1.Negative feedbacks received form customer.
Training and development	1.Latest technology used in technical assistance. 2.Skill development programs for technicians	1.Establishing research team to acquire current issues and problems of users of computers and various software. 2.Use of good presentation tools in books and newsletters.	1.Amount spent in research and development year on year. 2.Number of training hour undergone by technicians.

Solution to second question :

As a cost management information the most relevant information Kristen required to manage is Product and service Costing because of following reasons :

1.To manage present and future cost the information of present cost is must required.

2.The Cost information in service sector is equally important as in manufacturing sector.

3.The cost per hour incurred on technician in company will enable company to decide the revenue it should earn per hour from customer to earn profits.

4.The overall cost per hour must also include fixed cost components like training cost of technicians, cost incurred on purchasing software, laptops etc.

5.The planning and decision making part comes later after deciding cost of services to change the policies to become more profitable.

6.Also company must focus on non financial objectives of customer satisfaction by sacrificing short term profits and targeting long term goals.

Note : Question demands management opinion which differs person to person but overall essence should be same.